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March 27th - 2017

Money Talks (Part 2) – How PSD2 will impact European banking

This is the second of three articles exploring how chatbots and AI are allowing Fintech companies to meet customer requirements, while reducing the friction they may experience in currently available channels.

Summary

The pending introduction of European Directive PSD2 concerning access to bank-held account information will throw the market open.

A sea-change for European banking

Many of us in Europe have looked on with envy as our fellow consumers in the US enjoy services like Mint that can access and combine personal financial information from a range of sources and provide insights and advice on spending habits. On this side of the Atlantic, we may hold a range of bank accounts and credit cards from several institutions, but there is no easy way to gather the information held by each provider in one place as they are under no obligation to share customer data.

All this is due to change in the near future with the advent of Open Banking and Europe’s PSD2 (Payment Service Directive), which will see banks obliged to provide Third Party Providers (TPPs) with access to their customers’ account information (XS2A) via Application Program Interfaces (APIs)

This represents a sea-change for European banking. No longer will incumbent banks hold a monopoly on their users’ data. Third party Fintechs and ‘Challenger Banks’ will now be able to retrieve customer account information making payments on their behalf, or displaying all of their account information in one place.

Banks and third parties on the starting line

PSD2 raises challenges and opportunities for incumbent banks and third parties to provide new types of services which have been broadly categorised as Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs)

Experience is key to winning and retaining customers

So, while the UK are getting started already via the Open Banking project, in the next 12 – 24 months a new generation of Fintech companies and established banks will be preparing to offer EU users previously unavailable insights into their financial lives.

We can envisage scenarios where the provider can summarise all of the credits or debits occurring across a user’s accounts, offering retrospective analysis, forward-looking predictions and timely reminders of anticipated transactions. With access to a wealth of user data, the provider may recommend switching from one financial product to another to gain a better interest rate or benefit.

With all this information, Banks, AISPs and PISPs will need to distinguish themselves with compelling user experiences, offering customers insightful analysis of their financial health along with context sensitive information served in a timely manner.